Health Law Gives Medicare Fraud Fighters New Weapons

With help from the Affordable Care Act, government fraud investigators will make more use of computer programs to detect Medicare and Medicaid scams.

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Originally published on August 22, 2012 7:01 am

Fighting health care fraud in the U.S. can seem like an endless game of Whack-a-Mole. When government fraud squads crack down on one scheme, another pops up close by.

But the fraud squads that look for scams in the federal Medicare and Medicaid programs have some new weapons: tools and funding provided by the Affordable Care Act.

Medicare and Medicaid pay out some $750 billion each year to more than 1.5 million doctors, hospitals and medical suppliers. By many estimates, about $65 billion a year is lost to fraud.

"For a long time we were not in a position to keep up with the really sophisticated criminals," said Peter Budetti, who oversees anti-fraud efforts at the Centers for Medicare and Medicaid Services. "They're not only smart, they're extremely well-funded. And this is their full-time job."

And their creativity is endless. Criminals use real patient IDs to bill for wheelchairs that were never delivered or exams never performed. Dishonest doctors — a small percentage of physicians, to be sure — charge for care they never deliver or perform unnecessary operations. In one scam, criminals bill Medicare and a private insurer for the same patient.

But if crooks are smart, it may turn out that computers are smarter. The federal health law and other legislation directed the federal government to start using sophisticated anti-fraud computer systems. Budetti said the systems, which are being used first with Medicare, are similar to those used by credit card companies to detect suspicious purchases.

"We're able to now verify whether a person was being treated by two different physicians in two different states on the same day or a variety of other possibilities," he said.

The computer program crawls around the heaps of Medicare claims — some 4 million a day — to look for outliers: spikes in prosthetics in Miami or heart stents in Missoula. And for the first time, doctors and others who want to bill Medicare are being assessed based on their risk to commit fraud. Those who seem crooked are kept out.

Lou Saccoccio, head of the National Health Care Anti-Fraud Association, said the aggressive computer systems and the government's new authority to suspend payments signal an important change at the Centers for Medicare and Medicaid Services.

"What the Affordable Care Act does and what CMS, I think, is doing now is really a shift of focus of the 'pay and chase' mentality," said Saccoccio. "[That's] where the fraud is committed, you've paid the money, now you have to go out and get it back and prosecute the individual."

Pay and chase has given way to a prevention of fraud model, he said.

Over the next decade, Congress will direct some $340 million in additional funding for government anti-fraud efforts. Still, Saccoccio expects that the aggressive new efforts, which he applauds, will yield far more leads than the current team of investigators and analysts can handle.

"As you get all this information, do you have the resources to look at it all, triage it, so to speak, and make determinations?" he asks.

There's only so much detective work investigators can do sitting at computer terminals, says Patrick Burns of Taxpayers Against Fraud. The effort also needs some foot soldiers, Burns said.

"There has not been historically, in health care, enough ground truth-ing," Burns said. "What I mean by ground truth-ing is: You go to Miami, you get 100 bills, and you go and actually see, is there a doctor's office where you're sending the money?"

Burns says the Obama administration's approach to fighting fraud has been more systematic than previous ones. Indeed, the number of so-called Medicare Strike Force teams operating around the country has quadrupled since 2009. Still, the mantra of the fraud fighters sounds a lot like a department store sale: The more you spend, the more you save.

"What we need to do is fund a war on fraud like we would fund a single day of a real war," Burns said. "If we do that, this country will straighten out real quick."

In the meantime, those in charge of the government's anti-fraud efforts say the new approach is working. The number of defendants facing fraud charges jumped sharply last year. At the end of next month, Medicare is expected to report to Congress the number of new scams detected and the number of new cheats kept out of the program.

Now, the fight against health care fraud is a little like the game of football. One side may have a good offense, so the other develops a better defense. So the offense adapts and tries something new. Now, when government fraud investigators stop one scheme, crooks may try something else. So Medicare and Medicaid fraud investigators have developed a new tool of their own. Here's Sarah Varney with our partner Kaiser Health News.

SARAH VARNEY, BYLINE: Forget purse snatching. Forget Ponzi schemes, smart criminals know the real money is made in health care. Medicare and Medicaid pay out some $750 billion each year to more than a million and a half doctors, hospitals and medical suppliers. By many estimates, about $65 billion a year is lost to fraud.

PETER BUDETTI: For a long time we were not in a position to keep up with the really sophisticated criminals.

BUDETTI: They're not only smart, they're extremely well funded. And this is their full time job.

VARNEY: And their creativity is endless. Criminals use real patient IDs to bill for wheelchairs that were never delivered. Dishonest doctors - a small percentage of physicians, to be sure - charge for care they never gave or perform unnecessary operations. In one scam, criminals bill Medicare and a private insurer for the same patient.

But if crooks are smart, it may turn out that computers are smarter. The federal health law and other legislation directed the federal government to start using sophisticated anti-fraud computer systems. Budetti says the systems, which are being used first in the Medicare program, are similar to those used by credit card companies to detect suspicious purchases.

BUDETTI: We're able, now, to verify whether or not people actually were being treated by two different physicians, in two different states on the same day or a variety of other possibilities.

VARNEY: The computer program crawls around the heaps of Medicare claims, some four million a day, to look for outliers: spikes in prosthetics in Miami or heart stents in Missoula. And for the first time, doctors and others who want to bill Medicare are being assessed based on their risk to commit fraud. Those who seem crooked are kept out.

Lou Saccoccio, head of the National Health Care Anti-Fraud Association, says the aggressive computer systems and the government's new authority to suspend payments when there's a credible allegation of fraud, signal an important change at Medicare, known as CMS.

LOU SACCOCCIO: What the Affordable Care Act does and what CMS is doing now is really a shift of focus of the pay-and-chase type of mentality - where the fraud is committed, you've paid the money, now you have to go out and get it back and prosecute the individual - to a prevention type of mentality.

VARNEY: Over the next decade, Congress will direct some $340 million in additional funding for government anti-fraud efforts. Still, Saccoccio expects aggressive new efforts, which he applauds, will yield far more leads than the current team of investigators and analysts can handle.

SACCOCCIO: As you get all this information from the system, you know, how - do you have the resources to look at it all, to triage it so to speak and make determinations?

VARNEY: There's only so much detective work investigators can do sitting at computer terminals, says Patrick Burns of Taxpayers Against Fraud. Burns says to snuff out a scam, you've got to see it for yourself.

PATRICK BURNS: There has not been, historically, in health care arena, enough ground truth-ing. What I mean by ground truth-ing is: You simply go to Miami, you get a hundred bills. You look through them and you go and actually see, is there a doctor's office where you're sending the money?

VARNEY: Burns say the Obama administration's approach to fighting fraud has been more systematic than previous ones. Indeed, the number of so-called Medicare Strike Force teams operating around the country has quadrupled since 2009. Still, the mantra of the fraud fighters sounds a lot like a department store sale: The more you spend, the more you save.

BURNS: What we need to do is fund a war on fraud like we would fund a single day of a real war. If we do that, this country will straighten out real quick.

VARNEY: In the meantime, those in charge of the government's anti-fraud efforts say the new approach is working. The number of defendants facing fraud charges jumped sharply last year. And at the end of next month, Medicare is expected to report to Congress the number of new scams detected and the number of new cheats kept out of the program.